Cash-strapped Allentown arena getting $10 million loan

Bank loan will allow construction workers to start building foundation.

Preparation for a new hockey arena in downtown Allentown continued Thursday. (DONNA FISHER, THE MORNING…)

July 06, 2012|By Matt Assad, Of The Morning Call

Allentown's cash-poor arena project will soon get a $10 million infusion that city officials hope will carry the project until the big money arrives in August.

City finance attorney Marc Feller said arena planners hope to close next week on a National Penn Bank loan held up for months by lawsuits filed by suburban communities that were challenging the arena's use of outside community tax collections.

Now, with the lawsuits heading toward settlement, that interim financing could arrive soon, allowing construction crews to begin delicate foundation work designed to prevent the arena from falling victim to the kind of sinkholes that forced demolition of Corporate Plaza on the same site 18 years ago.

"Now that the legal challenges seem to be taken care of, we expect to finalize that loan by the end of next week," Feller said. "Barring any last-minute problems, that money should be available soon."

The $220 million project to build an 8,500-seat hockey arena, seven-story office building and two parking garages has been held up since Hanover (Northampton County) and Bethlehem townships challenged the project's ability to help fund the arena with earned income tax collections of township residents working in the 130-acre arena tax zone.

The challenges have prevented the city from selling bonds to fund the project, but tax-law changes adopted with the new state budget removed suburban earned income tax collections from the arena tax zone, seemingly making those lawsuits moot.

The city expects to be able to get the full arena financing in late August, but until then officials hope to use the $10 million from National Penn Bank to begin fortifying the foundation. That interim financing was set to be available in March, until the lawsuits kept National Penn from releasing it.

The city used its initial $35 million in interim financing to acquire properties and prepare the block at Seventh and Hamilton streets, but that money ran out in May. Over the past month, the city has been tapping a $5 million payment from City Center Investment Corp., which had agreed to pay the money as part of its development of the seven-story office building and parking deck in the arena block.

The $5 million is nearly gone, and the new National Penn Bank money is needed to carry the project into August. Bank officials Friday declined to comment on the loan money, which will be used to begin installing "micropilings" to support the 1 million-square-foot arena complex.

"The [micropilings] are next," said Sara Hailstone, Allentown's director of community and economic development. "It's my understanding that before we can start going up, we must first go down — deep down."

Micropiles are holes 81/2 to 11 inches in diameter that will be drilled at least 60 feet into the bedrock to help anchor the arena. Hundreds of the foundation holes will be drilled into the subterranean limestone, and any voids beneath the future playing surface will be filled with a special compaction grout.

When sinkholes caused Corporate Plaza to collapse in 1994 at the same location, engineers blamed the disaster on unstable soil that collapsed into a void below one of the building's columns. That undermined a water main, which cracked, dumping 3 million gallons of water into the ground.

The rush of water eroded the earth beneath the building's foundation, leading to its collapse and eventual implosion. The site was paved over and remained vacant until the city acquired the block and demolished the buildings around the former Corporate Plaza footprint.

The city hopes to begin major construction in September, and publicly gives a September 2013 target date for the arena's opening as the home of the American Hockey League Phantoms. Privately, officials have admitted hitting that target will be difficult, given delays caused by the lawsuits.

State Rep. Jennifer Mann, D-Lehigh, who sits on the Allentown Neighborhood Improvement Zone Development Authority, said it's possible a majority of the hockey team's home dates would be pushed to the end of the season, giving crews a few more months to ready the building for opening.

Either way, Mann is encouraged that the project is back on track now that the flow of money has apparently been restored.

"The biggest downside of the litigation is it put a dark cloud over something that is really a positive for everybody," Mann said. "I'm just glad that that cloud is gone."